India’s gift to Paris Motor Show

On the face of it, there is very little of any direct interest for India in the ongoing Paris Motor Show that began on Thursday. There will not be too many small cars on the show and the Japanese who rule the streets here are generally overshadowed in such motoring extravaganzas in Europe. But there are two cars that are expected to make waves for different reasons. And they have a distinct India connection. Ironically though, the two cars may not come to India soon. One of them may not ever.

Peugeot 301
This was supposed to be the troubled French car maker’s spearhead into its second innings in India. The 301 is the start of Peugeot’s new line up of cars that appeal to the budget customers of emerging countries. A compact sedan on the lines of the Volkswagen Vento and Skoda Rapid, it is expected to go on sale early 2013 and makes its debut on the world stage in Paris.

However, India was supposed to be among the first markets for the car and Gujarat was expected to be one of the first factories for the car. Like the Vento and Rapid, the car was designed keeping Indian tastes and aspirations in mind and it was tested extensively on Indian roads. Besides this, there are many firsts associated with the nameplate. Take for instance the name itself.

It is the first Peugeot model to use a new strategy where models either end with a 1 or an 8. The first number signifies the size of the vehicle. In this case, 3 indicates an entry level sedan. The middle number has no relevance and would be a 0 or a double 0 for effect. The last number indicates where the car is positioned. If it is a 1 like in the 301, it represents Peugeot’s new economy range. An 8 would mean an aspirational product.

The company’s dark clouds in its home markets in Europe however, spelt doom for its India foray. Last year it recorded a loss of Euro 440 million (Rs 3,000 crore). Things are not looking up this year either. It has predicted a 5% drop in sales in Europe.

As a result, it has little money to spend in India. Its office in Bombay was shut down last year and shifted to a makeshift shack in Ahmedabad. The number of employees, 15 at one time, has dwindled to just a singular number. Its plan to set up a manufacturing facility in Sanand Gujarat, with a Rs 4,000 crore investment is in a state of limbo indefinitely. It in its first phase, the plant would have had a capacity to produce 1.7 lakh cars by 2014. Last week, the company officially returned the land parcel of 600 acres that was allocated, to the state government. It could not pay the installments that were due for the land.

It is a situation that had plagued another fellow French company Renault back in 2008. Back then, the global financial crisis and rising debt meant Renault could not afford to spend on new markets and had to back pedal its India plans and defer it for 3 years. It came back into India only last year.

The only difference though is that In the case of Peugeot things are starker. It does not have a fledgling global partnership like Renault’s with Nissan, its partner Citroen has its own set of problems not too dissimilar to Peugeot. So while Nissan’s new products–Micra and Sunny– helped Renault chalk out its emerging market strategy by sharing platforms and engines, Peugeot is unlikely to get any helping hand from outside.

Hence the conjecture that a made for India 301 may never debut here at all. But it may regale markets around the world nevertheless, as a gift from India.

Jaguar F type
This one beauty that is already making waves and just a look at the pictures is enough to understand why. A two seater sports car convertible touted as a spiritual successor of the legendary E type, the F word stands for fabulous here. To the uninitiated the E type is widely considered as one of the most beautiful sports cars ever made on this planet.

It paints Jaguar in a new light altogether, as a re-energised reinvented icon that is again ready to take on another legend–Porsche. For sure, the F type showcased in Paris on Thursday will go head to head with the encyclopedia for sports cars–Porsche 911.

The F type is as much a result of the hard work, toil, technical expertise and ingenuity of the engineers at Gaydon, as the decision made by a few grey haired gentlemen in Bombay House in 2008. For it is now clear as daylight that had Tata Motors not taken over JLR then, the F type would not have been born. Developed over the last 3 years, it is the first car that JLR has designed from scratch after the take over and would not have been possible had Tata not given a free rein to the engineers.

Consider this. Sale of Jaguar cars had declined by almost 20% to almost 52,500 units in 2009. Under Ford’s now defunct Premier Automobile Group, it was bleeding and as a result there was little dough to spend on new products. The consolidated debt for the two companies in 2008 stood at a staggering Rs 21,900 crore. The uncertainty over the future and troubled economic situation in Europe and US also meant that the morale was down. In 2008, the key words doing the rounds in Goodwood was consolidation and conservation.

After taking over the business for $ 2.3 billion in the summer of 2008, Tata did just one good thing–freed Jaguar and Land Rover of all these worries. The coffers were opened up and Gaydon was buzzing again. While Land Rover expedited work on the compact SUV Evoque that had already been conceptualized under Ford, Jaguar dreamt about the predecessor to the E.

The gamble has paid off and how. In 2008-09, JLR’s pre tax loss was Rs 1,800 crore. The benefits of the take over were visible instantly. In 2009-10, the loss had been converted to a net profit of Rs 24 million pound (Rs 206.4 crore). The following year, the turnaround was complete with a profit of 1036 million pound (Rs 8,988 crore) and last year the companies were firing on all cylinders with a profit of 1481 million pound (Rs 17,352 crore).

The key again was the increase in R&D spend under Tata’s ownership–it more than doubled to Rs 8032 crore in 2010-11 from Rs 3081 crore 2009-10. This year, the companies would be spending a staggering Rs 17,352 crore towards capacity expansion around the world. So much so that it is a complete role reversal now with JLR propping up parent Tata Motor’s financials. It brought in 95% of Tata Motor’s profits in the January March quarter this year and now contributes to almost 50% of its revenues.

The F type is clearly the result of such a dramatic turnaround that would not have been possible without Tata’s penchant for acquisitions. A car that is powered by two supercharged engines–a 3 litre 6 cylinder with 340 horsepower and a 5 litre 8 cylinder with 495 horsepower–gallops from 0-100 in 5 seconds over an 8 speed transmission gearbox and is built with an extensive use of aluminium not seen anywhere else besides aircrafts, this car is a reaffirmation of what Jaguar is all about.

But India is not a country for sports-cars and the F type will not be the darling of the masses here. Its launch then may take some time and maybe insignificant but with its first legitimate sports car in half a century, Tata has given Jaguar back to the world.